S&P 500, Nasdaq rise after inflation data, strong earnings

U.S. stock indexes opened higher on Wednesday as investor sentiment improved following cooler-than-anticipated inflation data and robust corporate earnings, though the Dow Jones Industrial Average lagged behind its peers.

The S&P 500 and Nasdaq Composite were both up in early trading, extending gains from the previous session. The S&P 500 rose 0.6%, while the Nasdaq Composite added 1.1%, driven by gains in technology and consumer discretionary stocks. The Dow Jones Industrial Average, however, was little changed, reflecting mixed performance among its components.

The upward move in equities followed the release of the latest Consumer Price Index (CPI) data, which showed a slower-than-expected rise in prices. The CPI increased 3.3% year-over-year in May, below the 3.4% forecast by economists polled by Reuters. On a monthly basis, the index rose 0.2%, in line with expectations. Core CPI, which excludes volatile food and energy prices, also came in below forecasts, increasing 3.4% year-over-year and 0.2% month-over-month.

Investors interpreted the softer inflation figures as a sign that the Federal Reserve may hold interest rates steady for longer, reducing the likelihood of aggressive monetary tightening. Futures tied to the Fed’s policy rate indicated a roughly 68% chance that the central bank would maintain its benchmark rate at its next meeting in July, according to CME Group’s FedWatch tool.

Corporate earnings also supported the market’s advance. Major retailers reported stronger-than-expected sales and profit margins, while technology firms continued to benefit from optimism surrounding artificial intelligence and cloud computing. Analysts noted that the earnings season had so far exceeded expectations, with nearly 80% of S&P 500 companies beating profit forecasts for the first quarter.

Despite the positive momentum, some strategists cautioned that risks remained. Concerns about economic growth and potential geopolitical tensions kept a lid on gains in the Dow, which includes more economically sensitive sectors such as industrials and financials. The index was up just 0.1% in early trading, with shares of companies like Boeing and Caterpillar under pressure.

Market breadth was mixed, with advancing issues slightly outnumbering decliners on the New York Stock Exchange. Trading volume was moderate, reflecting a cautious approach among investors as they awaited further economic data and Fed communications.